Mortgage 101 LIVE – taking your calls for Financial Literacy Month | November 08, 2022

In this special episode of Mortgage 101 LIVE, as heard on CityNews Halifax, Clinton Wilkins and Todd Veinotte take calls and answer your questions about mortgages and the real estate climate in Halifax. You don’t want to miss this episodes info about buying owner occupied vs a rental, financing mobile homes, if there were missed opportunities to sell, how people in fixed rates should renew their mortgages, if it’s a good time to buy for first time homebuyers, and if seniors should consider a reverse mortgage.

Mortgage 101 LIVE with Clinton Wilkins & Todd Veinotte Taking your calls for Financial Literacy Month

Don’t feel like watching the video? Check out the transcript below.

Transcript:

Special LIVE episode of Mortgage 101: Your Guide to Homeownership

Todd Veinotte: [00:00:00.07] Clinton Wilkins is in the house. Mortgage101: Your Guide to Homeownership. It’s a special edition: live in studio, because it’s Financial Literacy month and we’ve got some people on the line. Why don’t we just take a phone call?

Clinton Wilkins: [00:00:11.88] We love taking calls. We’ve been taking a call live on the air for a long time.

Todd Veinotte: [00:00:14.22] Let’s do it. Tim. Hello.

Caller Tim: Buying owner occupied vs a rental

Caller Tim: [00:00:16.84] Hi. I hope you two are doing well.

Todd Veinotte: [00:00:19.87] We’re doing well.

Caller Tim: [00:00:21.57] Well, that’s good. My question is, I’m currently living in one half of a duplex. I want to buy the other half when it comes up for sale. So I’m going to move into that side because I know I’ll get a better interest rate, rather than saying that’s a rental property.

Clinton Wilkins: [00:00:37.62] Correct. Yep.

Caller Tim: [00:00:38.57] Yeah. Am I able to future leverage say, okay, when I go to the bank and say, “okay, well I’m buying this other place, but I expect to make say, $2,000 a month on my place that I’m leaving. Can I add that to my income,” or they won’t let me do that?

Clinton Wilkins: [00:00:55.32] Yeah, that’s something totally doable. And we actually see this type of scenario all the time. So it would be the same as you living anywhere, Tim. You know, you currently have an owner occupied property. That owner occupied property would then become a rental property and the new one would be owner occupied. Definitely reasonable.

We see these scenarios happen literally all the time. What would happen on the existing property, depending on which lender is doing the financing for your new purchase, you would either need to get a lease agreement on the existing or some lenders will allow you to get a market rent analysis, which typically the more originator would do.

So if you come to a mortgage broker, like we would order the market rent and then the lender will use the market rent for your existing property to cover off those expenses. So certainly reasonable. And on the new property because it’s owner occupied. As long as the purchase price is, you know, under $1,000,000, you can certainly qualify for high ratio insurance. So 5% down on the first $500,000 and then 10% down anything over and above that. So totally doable.

Caller Tim: [00:01:55.32] Okay, perfect. Thank you. I was just wondering if I was able to do that type of thing. I knew I already knew about moving. Even though it’s next door, it’s a better interest rate. I already knew about that, but I wasn’t sure if I could get it worked so that I could get a potential income based into it.

Clinton Wilkins: [00:02:08.88] We can definitely use the income and that income would offset the expenses. So. Yeah. Great.

Todd Veinotte: [00:02:14.40] Thanks for the call, Tim.

Caller Tim: [00:02:16.63] Thanks.

Todd Veinotte: [00:02:16.90] Take care. 902-405-6000 if you want to ask Clinton Wilkins, our mortgage guru question, just like Tim did again, 902-405-6000 the way to do it. George, Hello.

Caller George: Getting a mortgage on mobile homes

Caller George: [00:02:27.67] Hey, good morning. How are you?

Clinton Wilkins: [00:02:28.96] Good morning.

Todd Veinotte: [00:02:29.62] We’re doing well.

Caller George: [00:02:30.79] That’s great. I was calling your show on Saturday. I thought it was live when you were talking.

Clinton Wilkins: [00:02:35.95] We might not have been answering the phone, unfortunately.

Caller George: [00:02:40.23] I’d like to know, Clinton, a family member is thinking about buying a mobile home, either a new one or one that’s used. And it seems to me like for my side of things, they seem to be like vehicles they seem to depreciate or the banks don’t look at them favourably. Like, do you have any thoughts on that on mobile homes? Like, should I, shouldn’t I? What’s your take.

Clinton Wilkins: [00:03:02.92] I’ll give you my skinny. I’ve been doing this for 17 years and we’ve done almost 5,000 transactions. In our office, specifically, we don’t offer financing on mobile homes.

The reason being is not every lender will lend on them and it can be challenging to arrange mortgage financing. There are a couple of bank lenders, so a big banks, there’s a couple of banks that will do it. And I would say the strongest people who finance mobile homes are credit unions.

The reason being is when you have a mobile, if it’s in a park and even if it is on its own land, depending on what the setup is on its land, you may need what we call a “clip.” So a chattel loan insurance program product. And with this clip product, typically the mortgage has to be high ratio insured.

So it needs to be insured by the Canadian Mortgage and Housing Corporation. And the challenge is that once you buy this mobile home, then that’s typically the mortgage that you have. So you can’t necessarily refinance or transfer the mortgage to another lender.

Caller George: [00:04:04.24] Okay.

Clinton Wilkins: [00:04:04.60] I would say a few years ago, it was definitely a little bit easier to get financing on mobile homes. But I think now it certainly is more challenging.

Caller George: [00:04:14.62] Okay. Thank you. I mean, those things are built to code and everything. That’s my dilemma. I can’t understand what the problem is.

Clinton Wilkins: [00:04:22.15] I think part of the challenge is the security. So I think in the old days, people would have mobiles and parks and if they ran into some financial issues, they would then remove the mobile from the park and the lender would never be able to find the property again. I think in today’s day and age, things are more tied down. And, you know, there certainly are some options, but I think there is a little bit of a challenge.

Todd Veinotte: [00:04:45.19] I’m just going to let you go. Just so noisy. Go ahead.

Clinton Wilkins: [00:04:47.63] I think it is more challenging to get financing on mobile homes. For me, I think it’s a great housing solution for many borrowers, typically mobile homes are a little bit less expensive than a freehold property are.

But I can tell you, like Todd, mobiles have become very, very expensive. And in my opinion, I think it is more valuable to have a property that is on a freehold and I think they last longer and I think there’s probably more appreciation.

So I think if you can’t afford it and you’re kind of weighing one versus the other, I would definitely go with a freehold property.

Todd Veinotte: [00:05:17.86] Okay, 902-405-6000 is the way to reach us. If you’d like to chat with Clinton, get some great advice. Mortgage related advice, of course. He is the mortgage guru after all. Richard, hello.

Caller Richard: Selling while the prices are high, missed opportunity?

Caller Richard: [00:05:28.66] Hi. How’s everybody doing?

Todd Veinotte: [00:05:30.46] We’re doing well.

Caller Richard: [00:05:31.88] Good. That’s good. Okay. Six months or maybe nine months ago, my secretary, she had bought a home and it was a $300,000 or $400,000. But the real estate was going crazy then. And I said to her, I said, “Well, how much is your place worth?” I said, “You should be able to get like a $200,000 extra out of it, like sell it.”

She bought it for $300,000 and she could sell it for $500,000. And I was saying to her, I said, “Well, you know, you should sell it, get that.” And she said, “No.” Well, like she could have sold it for $250,000. And I told her, I said, “You should you should sell it and get that money and put that money in the bank.” And she didn’t do it.

Now, like, I think the whole bottom fell out of this thing where she could have done this and she should have done it. And I just want you to more or less tell me that I was right.

Clinton Wilkins: [00:06:39.85] Well, you know, I think that there may be a couple of things in there that you touched on that could be accurate. I don’t necessarily think the bottom fell out. So I don’t think, I’m not going to agree with you on that.

I think that in Halifax and in Atlantic Canada, our demand is still more than the supply. Are things softer today than they were six months ago? Yes, they are. Primarily because of what’s going on with the rates and really what’s going on with inflation, has had a big impact on what’s going on with housing. The challenge is here, we’re not building new homes fast enough.

So I think there still is a very high demand. Are property is selling for as much over the listing price as they were? No. Are there as many offers coming in when there is a listing? No. Are things sitting longer on the market? Yes. But that means that the market is becoming more balanced and the average sale price is lower. But that doesn’t necessarily mean that the value of the real estate is less.

I think it’s maybe a symptom of the higher priced properties are just not selling as quickly or maybe even getting listed at all. So I think we’re in a little bit of a blip. We’ve never had a boom here in Halifax. We’ve typically have had growth of 1%, 2%, 3%. So us having double digit growth has been unusual.

So I think things are rebalancing a bit, but we’re still seeing real estate transactions going on every day and I think there’s some good news to that as well. We’re certainly seeing a lot of clients that are getting purchase agreements together where there was a lot of, I think, fatigue in the market due to just how frustrating it was to transact, buy and sell. Really. Hopefully that answers your question.

Caller Richard: [00:08:11.91] Well, no, I was just wondering if she should have capitalised on getting $250,000 in her bank account as opposed.

Clinton Wilkins: [00:08:24.72] But she still needs a place to live. And I think that’s the one thing that we need to focus on and I don’t think the prices are going down. Will things be as hot and where we at the top of the market six months ago?

We could be, but I don’t think it went from making $250,000 now and then that 250,000 profit is gone. I don’t think that’s the situation. Things are definitely softer, but things will sell for what the market value is. And the market value still is much more than it was six months, like a year ago. Two years ago, three years ago.

Todd Veinotte: [00:08:54.78] Thanks, Richard. Good to go.

Caller Richard: [00:08:56.06] Okay. Thank you.

Clinton loves being in the studio!

Todd Veinotte: [00:08:56.91] All right. Take care. 902-405-6000 or toll free 877-801-8255. That’s the way to reach us for Mortgage 101: Your guide to home ownership. And we’ll be back. Oh, yes, some April Wine. Gotta love it. Mortgage 101: Your Guide to Homeownership. A special edition. Live in Studio. Financial Literacy Month. Clinton Wilkins is along for the ride and I think he’s having, you love coming in here, don’t you?

Clinton Wilkins: [00:09:31.59] I know. I love coming in the studio.

Todd Veinotte: [00:09:32.88] You just love it.

Clinton Wilkins: [00:09:33.72] And you know what? I love talking to people live on the air. This is how we used to do our shows, the years gone by, obviously, we know the last three years we’ve been doing it on the weekends or four years.

Todd Veinotte: [00:09:42.24] We’re going to continue to do that.

Clinton Wilkins: [00:09:43.50] That’s still going to continue. We actually have a show the last weekend of this month that wraps up Financial Literacy Month, and Financial Literacy Month we really talk about income assets and credit.

We talk a lot about credit and we talk really about what’s going on in the market and how can you keep financial literacy month going all year long. I think going into the holidays this year, Todd, I think people need to be more financially aware.

You know, we want to give a great holiday to our friends and our family, but I think with what’s going on with inflation, we have to be more conservative this year. And, you know, I think it’s just a symptom of a more challenging year. And it’s okay to tighten our belts a little bit.

Caller Randy: How should I renew my mortgage?

Todd Veinotte: [00:10:19.29] Absolutely. Let’s go back to the phones, Randy. Hello.

Caller Randy: [00:10:22.08] Hey. Hi, Todd. Hi, Clinton. I’m at the point now with my current mortgage. I’m coming at the end of a five year lock in term, and the bank is calling me, but I’m about five months out now from renewing, so I can negotiate it again. And I’m looking at shopping it around, of course, because they’ve given me a rate that’s gone up like, I’m about almost 2% higher than where I am now.

And I’m trying to consider whether under these current conditions to lock in at a three year or a five year, go variable or keep it in a locked in deal with the way it is now. But I’m also considering shopping it around with a broker and wondering if they can compete with the banks on a level that I can save a bit on that interest.

Clinton Wilkins: [00:11:12.30] I think that’s a really great point. And we get asked these questions all the time. So when you’re up for renewal, you’re really a free agent, and if you’re not looking to add any money to your mortgage, i.e. get any equity out for renovations or are not debt or any of this stuff.

So if you’re looking at just the mortgage amount, there is a transaction that you can do which is called a transfer or an assignment. And in that type of transaction, typically you can really get the very best rate. And the new lender is going to pay the cost to transfer you over. So I would definitely talk to an unbiased mortgage professional.

I can tell you the rates on a transfer, especially if we’re at 65% of the market value or less, are typically as good of a rate as a customer buying a new home and putting down 5%. So typically you’re getting the best rates in terms of this type of transaction. So I think it’s definitely worthwhile.

The one thing that you need to take into consideration is we need to keep your amortisation in line with where you’re at. Now, many customers right now that we’re seeing that are coming up for renewal are in the exact same situation you are. And these are the ones that I’m really kind of concerned about coming into next year. So it’s people that are in very low fixed rates that are now coming up and in some cases they’re coming up and renewing into rates that are double the fixed rate that they’re coming out of.

So we’re seeing some customers that don’t necessarily want to do transfers because they don’t want to keep their amortisation in line. They are choosing to do a refinance even if they’re not pulling out any equity to extend the amortisation.

So I think it’s looking at the pros and the cons of both, but I definitely think it’s worth like a call and looking at the situation. Through our channel, we can secure a rate 120 days before that transfer occurs. So if you’re five months out…

Caller Randy: [00:12:53.77] Yeah. One of the other issues I do have currently is that my wife is working out of the country for the next three weeks. And so I keep getting called from this lovely lady at the bank and she wanted me to commit or whatever. And of course, without her here in the country, I can’t commit to anything without her, of course.

So if I get a rate, is it guaranteed for a term that know it’s locked in and I can wait till she gets home? Here’s our rate. We got quoted. Or is that too far out to get a guaranteed rate?

Clinton Wilkins: [00:13:22.08] I think you’re too far out right now. I think you need to wait about 30 days. You need to be within 120 days. And at that point, then you can get a rate secured. I’m certainly hearing rumblings that some of the fixed rates are softening.

So my opinion, you know, I’m very pro variable. Right now variable and fixed are almost at the same in terms of pricing. If we look at the next five years, though, the variable will likely be cheaper. Many economists think that we’re going to be in a recession type situation by the end of next year, which will then lower the rates. So I think if you were going to take a rate, I would stay away, likely, from a five year fixed depending on what your financial risk tolerance is.

If you really, really want a fixed rate, I would probably do like a three year fixed, but I would definitely lean toward the five year variable. So those are the two things that I would kind of look at in your situation. But again, the risk tolerance really needs to be taken into consideration here and kind of looking at your entire financial situation.

Caller Randy: [00:14:13.17] Right. Okay.

Todd Veinotte: [00:14:15.06] Sounds great. Thanks Randy.

Caller Randy: [00:14:17.38] Thanks, guys.

Todd Veinotte: [00:14:18.01] All right. Take care. Now on to 902-405-6000. Mike, hello.

Caller Mike: Following up on mobile homes

Caller Mike: [00:14:21.73] Hi. How’s it going?

Todd Veinotte: [00:14:22.60] We’re going well.

Caller Mike: [00:14:24.61] Right on. I had a couple of questions. First of all, Clinton about that. The caller that was calling about the mobile homes. I think he was probably referencing mini home for giving.

Clinton Wilkins: [00:14:39.33] I think he was referencing mini homes and obviously the situation is different. If it is a prefab, if it’s a prefab on a foundation. Regular financing can be obviously obtained. A lot of customers that we have…

Caller Mike: [00:14:51.57] My home for 15 years, is a mini home and I went in recently.

Clinton Wilkins: [00:14:56.52] You’re breaking up on us a little bit.

Todd Veinotte: [00:14:58.17] It’s really hard to hear. It’s really heard to hear. Say that again, Mike. Your reception’s good. Not good.

Clinton Wilkins: [00:15:04.11] I think he’s gone.

Email question about first time home buyers

Todd Veinotte: [00:15:05.31] I think we lost him. Sorry we didn’t get to that. Here’s a couple of email questions. Mike says this: “I was wondering if you can have the mortgage guru Clinton talk about first time home buyers and interest rates.”

Says, “I’m ready to buy a house in the HRM end for my family with a down payment saved up.”

Clinton Wilkins: [00:15:20.94] I think first time homebuyers is really actually a good time. It is more challenging, obviously, for a client to get approved right now, Todd. And I think that if you can get approved now, you can withhold really anything.

A lot of the first time homebuyers that we are talking to now, I think are a little bit frustrated just where the rates are. But we talk to them and say, you know what, if you can afford this payment now.

Clinton Wilkins: [00:15:44.01] When the rates do go down, keep your payment the same. You’ll have your mortgage paid off in half the time of the same cohort that you really bought a year ago. The other thing is what’s really interesting with first time homebuyers is they’re actually getting transactions together. You know, it’s not as competitive.

So I certainly think it is a good time. And, you know, the right time for first time homebuyer is the right time for them. You know, there’s no ideal time to do a big financial transaction, but I think getting preapproved is really the very first step. And then obviously you need to get geared up with a licensed real estate professional that is going to look after your best interests as well.

Email question about reverse mortgages

Todd Veinotte: [00:16:22.86] All right. This one, “Wondering what your thoughts are on reverse mortgages.”

Clinton Wilkins: [00:16:26.34] You know what I think? Reverse mortgages are becoming more popular. I think in our market there’s not as many reverse mortgages happening as there are maybe in some other markets, like Ontario and B.C..

I’ll tell you the reason why: The way that reverse mortgages work, it’s for seniors and it is a calculation between the seniors age and the amount that can be financed on the property. So the way that reverse mortgages work is traditionally in the old school way, you would get a small mortgage maybe at like 25% of the property value, and then you wouldn’t make any payments, no interest payments, no principal payments, and the balance just increases.

So we basically gets capitalised every month and then the senior can stay in that home and they can keep the mortgage in place until either they go to assisted living or they were to pass away. And at that point then the estate would sell the home and then the balance of the equity would then go to the estate.

It’s not as popular as maybe traditional financing, but the real pro with a reverse mortgage is if there’s been credit challenges in the past or if that senior is on a, you know, a very low income like CBP or OAS, they can still get this product.

Clinton Wilkins: [00:17:31.74] You don’t need to make a principal and interest payment. So it certainly can be interesting. Typically, more of the seniors that I see, we’re actually doing a lot of financing for seniors, believe it or not. Like we do financing for them and sometimes they’re giving gifts to family and sometimes they’re giving gifts so people can buy a home for a down payment.

The other time that we really do see seniors is sometimes even before people retire, they’re putting a mortgage on their property or maybe they’re putting a home equity line of credit in place. Sometimes it’s easier to qualify when you’re still working, but we still do transactions for people on pensions all the time because sometimes they need to do modifications to the property.

Sometimes they’re living off that equity a little bit and sometimes they’re doing, you know, making sure that they’re boring for investments or they’re paying down some debt. So there’s a lot of reasons why retirees do get a mortgage, but we do we do see quite a few.

Thanks for calling in and listening!

Todd Veinotte: [00:18:17.54] Well, that half hour went quick.

Clinton Wilkins: [00:18:19.01] I know. I feel like we could do another half an hour.

Todd Veinotte: [00:18:20.97] We really could. But unfortunately, we have other programming. But listen, how do people get ahold of you?

Clinton Wilkins: [00:18:25.82] I think checking us out online is the best place to start, Todd. They can check us out at TeamClinton.ca/Radio. Lots of great information on our website.